Rural women’s access to financial services

Rural women's access to financial services

Credit, savings and insurance

Diana Fletschner and Lisa Kenney

ESA Working Paper No. 11-07 March 2011

Agricultural Development Economics Division The Food and Agriculture Organization of the United Nations economic/esa

Rural women's access to financial services: credit, savings and insurance1

Diana Fletschner Senior Gender Expert & Director of Research

Landesa Center for Women's Land Rights

dianaf@

and

Lisa Kenney Evan School of Public Affairs

University of Washington

lkenney979@

Abstract: This paper reviews rural women's access to financial services, a key factor of successful rural development strategies. Designing appropriate financial products for women to be able to save, borrow and insure is essential to strengthen women's role as producers and widen the economic opportunities available to them. For this purpose it is essential to understand how context-specific legal rights, social norms, family responsibilities and women's access to and control over other resources shape their need for capital and their ability to obtain it. The paper argues that it is important that development strategies that aim to boost rural women's productive capacity must enhance women's direct access to financial services, i.e. not mediated through their husbands. A second benefit of improving women's direct access to and control over resources is that this leads to higher investments in human capital and have a stronger impact on children's health, nutrition and education with important long-term implications for families and societies. The paper details the new products and service delivery models introduced to address some of the constraints faced by women. These include technical innovations that improve access to existing financial services, changes in product design to better tailor products to women's preferences and constraints, and the development of new products such as microinsurance.

Key words: Women, gender, agriculture, financial resources, credit, insurance, intrahousehold allocation of resources

JEL: D13, J16, Q14, Q18

Acknowledgements: We are grateful for comments from participants at the SOFA writers' workshop, Sept. 2009, Rome. Any errors are the responsibility of the authors.

ESA Working Papers represent work in progress and are circulated for discussion and comment. Views and opinions expressed here are those of the authors, and do not represent official positions of the Food and Agriculture Organization of the United Nations (FAO). The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of FAO concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.

1 The research presented in this background paper to The State of Food and Agriculture 2010-2011, "Women in agriculture: closing the gender gap in development" was funded by FAO. The report is to be released on March 7 2011 and will be available at .

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Introduction

Ensuring that farmers have adequate access to financial resources is a key tenet of successful rural development strategies. Policy-makers have long understood that rural producers who cannot meet their needs for capital must settle for suboptimal production strategies. When producers are unable to make the necessary upfront investments or cannot bear additional risk, they have to forgo opportunities to boost their productivity, enhance their income and improve their well-being (Besley, 1995; Boucher et al., 2008, and; World Bank 2008a). Furthermore, without adequate access to loans or insurance, producers who face negative shocks, such as droughts, illness or a significant drop in the prices they receive, can lose some of the few assets they do have (Diagne and Zeller, 2001). Conversely, producers who have access to well-designed credit, savings and insurance services can avail themselves of capital to finance the inputs, labour and equipment they need to generate income; can afford to invest in riskier but more profitable enterprises and asset portfolios; can reach markets more effectively; and can adopt more efficient strategies to stabilize their food consumption (Zeller et al., 1997). In the aggregate, broader access to financial services provides opportunities for improving the agricultural output, food security and economic vitality of entire communities and nations.

Despite this widely accepted notion, rural financial programmes have been largely designed, crafted and implemented with the male head of household as the intended client and fail to recognize that women are active, productive and engaged economic agents with their own financial needs and constraints. Women constitute approximately half of the rural labour force and, while not always counted, they are economically active in each subsector of the rural economy. Even though millions of women throughout the world contribute to national agricultural output and family food security, detailed studies from Latin America, South Asia, and Sub-Saharan Africa consistently indicate that rural women are more likely to be credit constrained than men of equivalent socio-economic conditions (Fletschner, 2009 and Diagne et al., 2000).

Well-designed products that enable women to adequately save, borrow and insure against unexpected shocks are therefore essential in any efforts to strengthen women's role as producers and expand the set of economic activities they can undertake, the scale at which they can operate and their ability to benefit from economic opportunities. Yet, with the

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notable exception of a number of prominent microfinance programmes, the vast majority of rural credit, savings and insurance programmes do not take into account that women's legal, social and economic position in their communities differ from men's.

Rural financial markets are not gender neutral

To understand how commercial and state-owned development banks, cooperatives, traders and processors can improve their outreach to women, it is fundamental to identify how context-specific legal rights, social norms, family responsibilities and women's access to and control over other resources shape their need for capital and their ability to obtain it.

Property rights and control over assets

Legal regulations and customary rules often restrict women's access to and control over assets that can be accepted as collateral such as land or livestock. Women are much less likely to have land titled under their name, even when their families own land, and are less likely than men to have control over land, even when they do formally own it. Biased inheritance rights often bestow land to male relatives, leaving both widows and daughters at a disadvantage (Agarwal, 2003). Neither the state mandated agrarian reforms of past decades that granted much of the land to "household heads," who were typically men, nor the more recent marketassisted land reforms have led to significant improvements in women's access to and control over land (Deere and Leon, 1997 and Bezner Kerr, 2008). Even in countries where laws do protect women's land rights, these laws tend to be loosely regulated and implemented (Parada, 2008; Morrow Richardson, 2004, and; USAID, 2003).

Women's control over their families' livestock varies by culture (Tipilda and Kristjanson, 2008). Yet, typically, men are responsible for the purchase, sale or pawning of large animals, such as cows, horses and oxen, while women tend to claim control over small animals such as goats, sheep, poultry and pigs (World Bank, 2008b; IFAD, 2004, and; Miller, 2001).

Finally, in settings where men are portrayed and perceived as the main breadwinner, women's ability to offer family assets as collateral and their incentives to invest in productive activities are influenced by family dynamics that are likely to prioritize men's investments (Ospina, 1998).

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Cultural norms and family responsibilities

Socially accepted norms of behaviour and the roles women play in their families can have profound effects on the type of economic activities in which women can engage, the technologies available to them, the people and agencies with whom they can interact, the places they can visit, the time they have available and the control they can exert over their own capital.

In settings where sociocultural norms restrict women's mobility, their interactions with members of the opposite sex and their ability to attend trainings or receive formal education, women's access to information, institutions and markets is compromised. This is the case when women are not allowed to use public transportation, when they cannot afford to pay for it or when they cannot get away from their household responsibilities (Primo, 2003). It is also the case when women are prevented from interacting directly with men other than close relatives, or when they feel awkward doing so, limiting their participation in agricultural or financial training and their ability to benefit from working with extension agents and veterinarians, most of whom are male and primarily address other men (Aina, 2006 and Esenu et al., 2005). As a result of these constraints, rural women tend to get their information from informal networks of women,2 reinforcing the gender gap in access to information. The gap can be substantial: recent work to quantify it using data from Paraguay compares husbands' and wives' knowledge of financial markets and finds that rural women are 15 to 21 percent less likely than men to have basic information about the financial institutions in their communities (Fletschner and Mesbah, 2010).

Even when they have access to information on the financial services and market opportunities available to them, women may be less equipped to process it. Their lower levels of literacy and lack of exposure to other languages, especially relative to male family members, hampers women's ability to benefit directly from information that is provided in writing or in languages other than those they speak at home (UNDP, 2007 and Ngimwa et al., 1997) and to fully understand the conditions of complex financial products available to them (Brown, 2001). This matters as demonstrated by Cole et al.'s (2009) experimental work in India and Indonesia that finds financial literacy is a strong predictor of demand for financial services.

2 As documented, for example, in Aryeetey's (1995) description of seed technology diffusion in Ghana.

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Social norms also define the type of economic activities in which women can engage, the amount of time they can invest in them and the markets they can access. In most rural communities, activities tend to be sharply segregated by gender (Kevane, 2004; Roberts, 1998, and; Schroeder, 1996). Women are typically responsible for cooking, childcare, laundry, cleaning and the collection of water and fuel wood (Fletschner, 2008a and Bezner Kerr, 2008). While the gendered division of labour within agricultural production varies locally, men are typically in charge of tilling, ploughing, fumigating and selling crops to wholesale traders, and women tend to do most of the animal husbandry and the processing of agricultural or animal products (Fletschner, 2008a and World Bank, 2008b). In aquaculture and fishing, men are the primary fishers, while women mend nets, collect shellfish, smoke and dry fish for sale, and sell at local markets (World Bank, 2008b).

Women's ability to undertake entrepreneurial activities that depart from well-established social norms is influenced by whether or not a sufficiently large group of women engage in comparable enterprises. As a result, each woman's economic opportunities are shaped not just by their own individual access to financial resources but also by whether those other women are able to obtain the capital they need (Fletschner and Carter, 2008).

Cultural norms and family dynamics can also limit women's ability to exercise control over the savings they have or the semi-liquid assets they own. Anderson and Balland (2002) and Gugerty (2007) hypothesize that one of the reasons for the high level of female participation in rotating credit and savings associations (ROSCAs) is that this socially accepted strategy to save allows women to protect their savings from husbands and other relatives. Alternatively, women may choose individual savings programmes that allow them to keep details or even knowledge of these savings to themselves to avoid being subjected to pressure from others.

Finally, social traditions can leave women in a particularly vulnerable position since, in addition to the risks associated with pregnancy and childbearing, women are more likely to experience domestic violence, to experience greater hardships in case of divorce and to lose their assets when their spouses die (Banthia et al., 2009).

Behavioural differences

Whether a result of innate psychological characteristics or of attitudes influenced by social conditions, men and women tend to exhibit systematic differences in their behaviour. Of particular importance when assessing the adequacy of financial products available to rural

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